Following the GFC, I had questions about our financial and economic system and found no adequate answers. In my quest, I have answered most of my questions and have satisfied my curiosity, sharing my findings via this blog. But it's time to quit spitting into the wind and the article below is likely my last. I need to get back to work...if you know of an organization that could use someone like me, please let me know.
Sunday, September 18, 2016
The Myth That America's Superior Demographics Can Save It
There are three basic means to grow the population and increase the quantity of potential consumers...spurring the much desired economic growth necessary to make our present economic system function.
1- A rising number of births on a year over year basis.
2- Rising rates of immigration.
3- Don't die...or also known as living longer.
What I will outline is that the US birth rate is collapsing, that immigration on a net basis (between legal and illegals) is slowing, and the only means we have of population "growth" is simply having the old live far longer than the preceding generation. This however isn't real growth and won't create the desired economic growth necessary to make this system function...actually quite the opposite.
Previously, I outlined in the linked article (HERE) the massive population reductions the Census has already acknowledged in 2012 and 2014...but even deeper cuts to the Census estimates are on the way as birth rates and immigration continue to slow. The obvious impact that fewer new consumers vs. a massive rise in elderly sellers (particularly regarding residential real estate) is outlined (HERE).
US Population Growth Essentially ceased in 1960's
The under 15yr/old US population grew by 18 million from 1950 to 1965. From 1965 through 2013 (the most recent year with full data), the under 15yr/old population has grown by a mere 2 million persons. The base of potential school students (and subsequent college students) is now just 3.2% larger than in 1965. This is an annual increase of 0.06% (six one hundredths annually). Of course, this is far better than Japan, Germany, or China which have seen outright collapses in their under 15yr/old populations of nearly 50% in the same time frame. However, I'm not sure having a less aggressive cancer than your neighbor makes many cancer patients feel much better.
But since 1965, the US population (in total) grew from 194 million to 316 million (again, 2013 data) or an increase of 122 million Americans. How is it that the population under 15yrs/old has only fractionally changed? Check the 15+yr/old population...it grew from 135 million to 255 million or an increase of 120 million. So, if one viewed the US population at it's headwaters of the under 15yr/old population, it's very clear America isn't growing...and if one views the US population from 15-->100yr/olds, it's only growing older...and the eventual looming rise in the death rate will unmask the lack of bottom up growth.
Collapsing Birth Rates
Why the population of young hasn't grown is simply collapsing birth rates. The simplest way to understand what "ails" America and hinders economic growth is the collapse in population growth. In the face of decelerating rates of population growth (growing consumer bases) the Federal Reserve has substituted interest rate cuts since 1981 to incent greater leverage and debt. However, as the chart below shows, while the US population has more than doubled in total population since 1953...the annual number of births is lower now than in 1954 through 1963, 1991 through 1995, and 2000 through 2009...and 2015 fell again from 2014 (columns highlighted in orange). And this isn't a blip or lull...everything says the total number of births likely peaked in 2007 and will only continue to decline indefinitely from here.
Why? As outlined last June by the National Center for Health Statistics (HERE), of the nearly 4 million babies born in the US in 2015, about 96% of their mothers were between the ages of 18-->39 years old (chart below breaks down births by mothers age).
This next chart destroys half of the myth of America's superior demographics (the other half, immigration is tackled in the link below).
From 1990 to 2007 (blue columns), the birth rate was shifting and skewing from younger to older mothers. Decreases among the 15-->30yr/old mothers were somewhat offset by increases among the 30+yr/old mothers.
However, since 2007, births are only slightly higher among the 35+yr/old mothers and births among millennials are collapsing...and collapsing at an accelerating rate.
Below, the annual number of births per 1000 females among each age segment in 1990, 2007, and 2015. The rise among the 35-39yr/old segment is decelerating and the rise among 30-34yr/olds has ceased since 2007. The under 30yr/old rates of birth are collapsing...the waterfall in births since 2007 are particularly obvious...and 2015 set new all time lows.
Lastly, for those wondering what about immigration. I outlined the waning sources of US immigration in a recent article (HERE).
So, in case I wasn't clear, the chart below highlights that US growth rates were premised on a growing core US population. See the core population growth rate coincided with Federal Funds Rates peak...and the deceleration of that core population growth that began about 1980 only continues to slow. The Fed's abuse of interest rate policy to incent a slowing population to leverage up is plain. But the growth to service all that debt is never coming.
America will not grow her way out of this hole via population growth or new debt (nor will the world)...it's time to stop the pretending and recognize what is painfully obvious. Our "leaders" and the Federal Reserve need to be removed from their self appointed positions as masters of the universe. Free markets must be (re?)implemented and real change is needed more than ever...not a farcical election but real bottom up change. I hope we're ready...because one way or another, big change is coming.